How To Maximise Your Insurance Income Tax Reliefs

How To Maximise Your Insurance Income Tax Reliefs

We know, we know, filing taxes is a pain.

But if there’s anything to look forward to, it’s tax reliefs. By maximising your reliefs, you could pay less in taxes – or even claim money back from the government if you’ve overpaid.

One of the best ways to do so is to file your insurance reliefs. It’s not as simple as it seems, as it’s divided into different categories of insurance and lumped together with the Employees Provident Fund (EPF) tax relief. So here’s how it works, and how you can maximise your insurance tax reliefs.

What tax reliefs can you claim for insurance premiums?

Here are the insurance-related tax reliefs you can claim for:

Tax relief categoryLimit
Life insurance and EPF INCLUDING not through salary deduction

  1. Pensionable public servant category

    • Life insurance premium

  2. OTHER than pensionable public servant category

    • Life insurance premium (Restricted to RM3,000)

    • Contribution to EPF / approved scheme (Restricted to RM4,000)
RM7,000
Education and medical insurance (INCLUDING not through salary deduction)RM3,000
Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2025RM3,000
Source: Hasil.gov.my

What insurance policies are eligible for tax relief?

You can claim for your life, education and medical insurance, as well as deferred annuities. Here are the types of policies that are eligible, and how much of your premiums you can claim for tax relief.

 ConditionsHow much is eligible for tax relief?
Life insuranceMust be contracted by you on your life, or the life of your spouse; or both.100%
Education insuranceMust be contracted by yourself for you, your spouse or your child.

The beneficiary should be your child.
100%
Medical insuranceThe policy coverage should be for a period of 12 months or more.

Includes group medical policies if you are paying the premium.
Stand-alone policy or as a rider to a life insurance policy: 100% of premiums/rider premiums

If a dreadful disease (i.e. critical illness) cover is attached to a basic policy: 100% of rider premiums

If a dreadful disease (i.e. critical illness) cover is packaged together with a term life/personal accident cover: 60% of premiums
Deferred annuity-100%

More details and conditions can be found in the Inland Revenue Board of Malaysia’s (LHDN) Public Ruling, Taxation of a Resident Individual Part I – Gifts or Contributions and Allowable Deductions.

Filing your tax reliefs with your annual insurance statement

When it comes to filing your reliefs, it’s handy to refer to your insurance annual statement. Your statement may break down the premiums you have paid under each tax relief category.

Here’s an example of an annual insurance statement by Great Eastern:

To file your tax reliefs, you’d just have to use the numbers provided by your annual statement. Based on the example statement above, the only tricky bit is that the critical illness coverage can be claimed under the medical or life benefit. You could claim up to 100% of your premium under the life insurance category, or up to 60% under the medical benefit category:

CategoryOption 1
Filing critical illness under life insurance category
Option 2
Filing critical illness under medical insurance category
Limit
Life insuranceRM329.17 + RM113.76RM329.17RM3,000 (non-public servant)

RM7,000 (public servant)
Education and medical insuranceRM1872.40RM1872.40 + (RM113.76 x 60%)RM3,000
Deferred annuity and PRS--RM3,000
Total reliefRM2,315.33RM2,269.82-

In this example, it makes more sense to claim the critical illness premiums under the life insurance category. But if you’ve exceeded the claim limit for this category, then you could claim the critical illness premiums under the medical insurance category. It’s all about trying to max out the claims available to you.

What else can you claim tax relief for?

We hope this has helped you make full use of your insurance tax reliefs. But that’s not all you can claim for – for a full list of tax reliefs, as well as other information on filing your taxes, visit our personal income tax guide. It’s best to file your taxes by the deadline, otherwise you could incur a penalty or get fined.

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